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EU invoicing directive draws concern

Ernst & Young says the EU invoicing directive, aimed at harmonising indirect taxation across Europe, will be hampered by the amount of freedom currently given to member states to impose local rules over specific requirements.

The invoice directive is a key component of the VAT system and the European Commission’s plans to harmonise indirect tax practise across the EU.

It is designed to simplify, modernise and harmonise invoicing rules, bringing in electronic invoicing, cutting administration costs and improving competitiveness.

But Peter Milnes, partner at E&Y’s indirect tax team, said the directive would be of concern to multinational companies who operate on a pan-European basis.

He added: ‘Harmonisation of European VAT law is an important step forward and a necessity in today’s market. The Directive opens up significant opportunities in terms of electronic invoicing and simplification of the invoicing function, making things easier and cheaper for businesses in the EU.

‘However, member states have been permitted under the Directive to impose local rules and conditions in a number of circumstances which reduces the harmonisation benefits and this will also cause a number of complications for pan – European companies.

‘Regulations need to be enacted in good time for January 2004. Each member state needs to get moving on developing a strategy to deal with this.’